G. Padmanabhan, former Executive Director of the Reserve Bank of India (RBI) and former Chairman of Bank of India, on Thursday said that the Unified Payments Interface (UPI) requires a sustainable revenue model to fund continued investments in technology, cybersecurity, and infrastructure. Speaking at the Global Fintech Fest 2026 in Mumbai, he backed the proposed levy of Merchant Discount Rate (MDR) charges on high-value UPI transactions as a step toward a more financially viable digital payments ecosystem.

Why Padmanabhan Supports MDR on High-Value UPI Transactions

Padmanabhan expressed clear personal support for introducing MDR charges on select UPI transactions, arguing that the move would enhance transparency rather than undermine the platform. 'I personally do not think so. I think I have written an article where I support this change. According to me, this will make the system much more transparent than it is today,' he said when asked whether MDR charges could weaken UPI.

He clarified that small-value transactions would continue to remain free for end users, in line with the government's stated position. The proposed changes, he argued, would ultimately reinforce the UPI ecosystem rather than erode it.

Reimbursement Burden Not the Primary Driver

Padmanabhan pushed back against the narrative that the government's motivation for introducing charges is primarily to reduce its own reimbursement burden. He noted that the government's UPI reimbursement outlay represents only a minor share of its overall finances, and that framing the debate around fiscal savings misses the larger structural issue.

The more pressing concern, he said, is the need for continuous capital investment in upgrading technology and security infrastructure. 'The system has been telling the Reserve Bank and the government that there are costs to this, developments will have to happen, we will have to continuously upgrade our security systems because of cyber security issues and things like that, we need capital,' he said.

Cybersecurity Costs and the Case for Viable Returns

Padmanabhan underscored that the digital payments sector faces mounting cybersecurity threats that demand ongoing investment. He argued that without a viable return on capital, attracting private investment into payment infrastructure becomes increasingly difficult — a risk that could compromise the long-term resilience of India's digital payments stack.

This comes amid a broader global reckoning with the costs of zero-MDR regimes. India's UPI, which processes billions of transactions monthly, has long operated without direct charges on most transactions, with the government compensating payment service providers through reimbursement schemes. Critics of the status quo argue this model is structurally unsustainable at scale.

RBI's Rate Guidance Reflects Inflation Vigilance

On the RBI Monetary Policy Committee's latest minutes and signals of a possible rate hike in forthcoming policy reviews, Padmanabhan said the central bank's forward guidance is a direct reflection of its reading of inflationary risks in the economy.

He contextualised the RBI's stance within a global trend, noting that central banks worldwide have been reassessing interest rate trajectories in response to shifting economic conditions. 'The Reserve Bank comes out with an opinion based on what they see in the economy. If they see possibilities of inflation, they give a forward guidance saying that this is possible,' he said.

With the Global Fintech Fest 2026 drawing policymakers, regulators, and industry leaders, Padmanabhan's remarks are likely to add fresh momentum to the ongoing debate over UPI's long-term monetisation framework — a question that will shape the future of India's ₹200-lakh-crore-plus digital payments market.